Gold Bullion

Gold bullion refers to physical gold manufactured in the form of coins or bars (with a high standardised purity) for the purpose of investment. By contrast, gold jewellery is physical gold, but it is not gold bullion because it has a lower purity and its purpose is aesthetic.

Gold bullion’s “purity” is the proportion that is pure gold (excluding impurities). Purity is measured in fineness (parts per 1000). Gold coins usually have a fineness of at least 916.7 and gold bars have a fineness of at least 995.0, but usually 999.9.

Gold bullion’s “content” is the weight of pure gold (excluding impurities). Content is measured in troy ounces. 1 troy ounce equals 31.1035 grams. Be aware that troy ounces (toz) weigh slightly more than normal (avoirdupois) ounces (oz).

Once you understand the unique terminology and valuation of gold bullion, you can map out your entire gold buying journey by reading our step-by-step guide on how to buy gold.

Gold Bullion Valuation

The gold price is expressed in dollars per troy ounce and converted to pounds by dividing by the exchange rate (eg $3,500 / 1.35 = £2,592).

Gold bullion’s value is calculated using the following formula:

Value (£) = Gold Content (troy ounces) X Gold Price / Exchange Rate

The difference between the value and price offered by a dealer represents the dealer’s premium, which is typically between 1.5% to 8% and is usually lower the higher the value. Gold bullion does not have VAT on it.

The gold content of coins is usually stated explicitly, so the formula above is used to calculate the value.

The gold content of bars may be stated explicitly, but usually the total weight of the bar (including impurities) in grams and the fineness are stated. So the gold content must be calculated first using the formula below before the formula above can be used:

Gold Content (troy ounces) = Weight (grams) X Fineness (xxx.x) / 1000 / 31.1035

eg What is the value of a 0.25 troy ounce coin, if the gold price is $3,500 and the exchange rate is 1.35 $ per £?

Value (£) = 0.25 X 3,500 / 1.35 = £648.15

eg What is the value of a 100g gold bar (Fineness 999.9) if the gold price is $3,500 and the exchange rate is 1.35 $ per £?

Gold Content = 100 X 999.9 / 1000 / 31.1035 = 3.21475 troy ounces

Value (£) = 3.21475 x 3,500 / 1.35 = £8,334.54